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The climate change trade-offs we want from our politicians

carbon AAP
Do politicians know what’s best? AAP

When it comes to climate change policy, what does the public really want?

Politicians, pundits and more than a few academics have claimed they know what’s best for Australia.

There have been a handful of public surveys, but these often simply ask people whether they support having a climate change policy. We still don’t know which climate policy, out of numerous possibilities, is the most popular.

The fundamental problem is that the public has not been thoroughly quizzed on the economic trade-offs required by any effective climate policy.

So how does the public think the cost should be borne?

At the UTS Centre for the Study of Choice (CenSoC), we sought an answer by talking directly with the public over a number of years. And we found the answers were both surprising and significant.

Consensus lost

The first step was to recognise there are not just one or two competing climate policies. There are many, and each policy is defined by its own specific characteristics.

In the early days of the Kevin Rudd government, there was a reasonable consensus between the major parties on an objective to reduce carbon emissions by at least 60% by 2050 and to use tradable carbon permits as the means to meet this objective.

Of course, there was substantial disagreement on how exactly to do this, but the nascent political consensus helped to define the job of quantifying public preferences.

It allowed us to pose well-defined trade-offs to the public - something often conspicuously absent in political discourse.

Effective climate policies with specific long-term emissions reduction objectives generally include clear stipulations about when to start and what to do with the revenues raised.

Each policy approaches these characteristics differently, which results in the first two trade-offs.

That is, policies that start later end up costing more than policies starting earlier and that are gradually phased-in.

Our research found that the public prefers to start the process now rather than later.

Spending the money: GST v rebates

The public also had strong views on where money from carbon permits should be directed.

Climate policies can raise a lot of revenue for governments, so responsible policy tends to take two forms.

Governments can either return revenue to the public in a general way, such as cutting the GST to reduce the drag on the economy of higher prices due to higher energy costs.

They can also rebate revenues to groups in society, such as the poor or elderly, which are seen to be adversely impacted by higher energy costs.

Such rebates represent classic efficiency-versus-equity issues that underlie much of economics and politics.

We found that self-interest largely influences public preferences for redistributing revenues. Older people prefer plans that return revenue to them, while wealthier prime-age workers favour reducing the GST.

Higher petrol or higher electricity prices?

Some sectors of the economy may be more acutely impacted than others under a climate change policy, so there are, not surprisingly, political pressures from some groups to be exempt or receive special treatment.

Pressure on climate policy often comes from the transport industry, which depends on oil, and energy-intensive industries, such as electricity utilities and mining. There are significant trade-offs required in this aspect of policy.

Exempting transport-related industries necessarily forces more of the burden of meeting emission reduction objectives on other sectors, particularly electricity.

So, consumers face either higher petrol or higher electricity prices. We found that once this trade-off is made explicit, the public is largely indifferent to initially exempting transport groups.

If one asks questions in surveys that do not make such trade-offs explicit, it is not surprising that exempting transport seems to be popular.

Energy-intensive industries: significant trade-offs are required. AAP

Little support for energy intensive exemptions

Not making trade-offs explicit is typical of many surveys that ask people to consider whether they support or oppose a policy outside of its broader context and with its specific characteristics left unspecified.

A majority prefer not to exempt energy-intensive groups, even when we explicitly explain their role with respect to jobs.

It is somewhat ironic, but not surprising, that competition between interest groups for exemptions and free permits played a key role in effectively halting progress towards an Australian climate policy.

Research trade-offs

Another trade-off discussed in the Garnaut report on climate change is whether to invest a substantial fraction of revenues raised to research and development programs that try to reduce future costs.

Investments in such programs use money that otherwise would go to individuals.

A majority of households prefer policies with this feature, and respondents who describe themselves as “technology optimists” strongly prefer including a research and development component.

Longer-term view

The key finding that emerges across a range of research in this area is that public preferences are remarkably stable over time.

The earlier consensus in Australia regarding what the long-term carbon reduction objective should be and that tradable carbon permits should be used to meet it has to a large degree been lost, as such there are more possible climate policy options.

Our recent surveys presented a wider range of climate policies with more characteristics and more possible values of characteristics.

We asked whether Australia should wait to see what the United States and China do. We found a large majority prefer Australia to take the lead, but there clearly is a minority group who prefer to wait for other major players to commit.

We also found that a “do nothing” option for climate policy received relatively little support.

We questioned respondents on how aggressively Australia should set mid-term carbon-reduction targets and found that the public prefers reasonably strong targets.

The public is largely split over the means of implementing a policy and many prefer stronger technology standards or taxes over carbon trading permits.

Public support for particular ways to implement a policy is influenced by how informatively one describes the pros and cons of each. Support tends to shift toward taxes when more information is provided. Hybrid approaches also appear attractive to many.

Widespread support

A clear message emerges from our work. There is widespread support for an Australian climate policy, but there are differences of opinion on some key policy features that suggest a need for compromise.

The public appears ready to accept the higher costs and make the trade-offs necessary for a successful climate policy to be implemented.

However, for that to happen the public needs objective facts and information from credible sources.

There is no free lunch whereby consumers can avoid paying one way or another, nor is there any solid evidence that a climate policy with reasonable objectives that is implemented in a sensible fashion will have a devastating effect on the Australian economy.

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